Page 281 - AAA Integrated Workbook STUDENT S18-J19

UK syllabus: Auditing aspects of insolvency

Upon appointing an administrator, certain protections are afforded to the company,
namely:

 The rights of creditors to enforce security over the company's assets are
suspended

 Petitions for liquidation are dismissed

 No resolutions to wind up the company may be passed

 The directors continue in office, although their powers are suspended.

2.3 Advantages of administration over liquidation

 Administration provides time to develop an alternative plan for survival.
Liquidation results in the cessation of the company and therefore any future
benefits that might have been generated will be lost.

 Members are less likely to lose their investment.

 Creditors are more likely to be paid. In a liquidation, unsecured creditors are
likely to receive nothing.

 Creditors will still be able to trade with the company if the administration is
successful. If the company is liquidated, the creditor loses a customer.

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